Falkland on the slide as Toroa well turns out dry

Shares in Falkland Oil and Gas slumped 97¼p, or 48%, to 105p today after the firm admitted one of its first attempts at exploration in the British-controlled corner of the south Atlantic had failed.

The company drilled about 7500 feet down in its Toroa exploration well in the Falklands' southern basin but said: "The well did not encounter any hydrocarbons and will now be plugged and abandoned."

Chief executive Tim Bushell tried to play down the impact of the news. "Whilst the results of the Toroa well are disappointing, it has to be remembered that this is the first well in a previously undrilled frontier basin," he said.

In the City, analysts pointed out that the Toroa news would not affect all the explorers in the Falklands equally. Borders & Southern Petroleum, like FOG works in the east and south basins. But Rockhopper Exploration — which made the first significant discovery in the Falklands waters at its Sea Lion well — and Desire Petroleum both focus on the north Falklands basin.

"No doubt those with a lack of appreciation of geography will beat up all the Falklands exploration companies as a result [of the Toroa news]," said Evolution Securities' Keith Morris.

"However, smart investors will be aware of the massive geological and geographical gap between the South and North Falklands basins — the latter having been massively derisked by the Sea Lion discovery."